SOS Ltd – ADR (NYSE: SOS) is headed for the top in the market this morning after falling more than 20% on Friday when two big short sellers announced they were taking positions in the stock. Nonetheless, it seems as though retail investors are working to bring these institutions to their knees, and if the Wall Street Bets crew gets behind the trade, a massive short squeeze may be on the horizon.
Here’s what’s going on:
Skip to What You Want to Read
- Short Sellers Take Aim at SOS
- Retail Investors May Wage a War
- Risks to Consider Before Buying SOS Stock
- Final Thoughts
Short Sellers Take Aim at SOS
As mentioned above, two known short sellers have taken aim at SOS stock. According to independent reports from both Hindenburg Research and Culper Research, the companies have taken short positions in the stock.
In their reports, both Hindenburg Research and Culper Research point to regulatory issues the company may face. Moreover, both short sellers suggest that SOS Ltd has released false information that has artificially inflated the price of the stock.
As a result, the two firms have taken large short positions in the stock. This means that they have borrowed shares from long investors, sold them directly into the market, and are hoping for declines which will allow them to purchase the shares back at an extreme discount, resulting in profits.
However, the short sellers may lose their shorts on this deal if retail investors band behind the stock.
Retail Investors May Wage a War
Over the past several weeks, we’ve watched as retail investors show what they’re capable of when they band together. It all started with GameStop, when the Wall Street Bets crew decided to squeeze the shorts out of their positions, sending the stock for dramatic gains.
Now, with two of the biggest short selling firms announcing that they are shorting SOS, it seems as though the stock is the perfect target for the Wall Street Bets crew, and for multiple reasons:
- Short Selling. The crew at Wall Street Bets doesn’t like the idea that hedge funds and other institutions short sell stocks that retail investors are long in, ultimately costing the retail investor money. With the announcement, Hindenburg Research and Culper Research have potentially put targets on their heads.
- Cryptocurrency. The Wall Street Bets crew has also been clear about their views toward cryptocurrency. The crew was part of the reason Bitcoin saw such a dramatic rise recently and they have tackled other cryptos, sending them skyward. SOS is a cryptocurrency play, which likely only adds to the appeal associated with the stock for the retail investing team.
- Float. Finally, SOS only has about a hundred million shares in its float. That means that if a short squeeze were to raise demand for shares, the supply of shares available to the public may not be able to keep up, leading to more dramatic gains.
Risks to Consider Before Buying SOS Stock
If you’re thinking about jumping into SOS Ltd stock, it’s important that you consider the risks. After all, there’s no such thing as a risk-free investment. When it comes to this particular stock, the most significant risks to consider include:
- Cryptocurrency. SOS is a cryptocurrency mining company. Due to the speculative nature of cryptocurrency, and the fact that the company is in the mining space, the stock itself is a speculative bet.
- Pennies. SOS is a penny stock. As a penny stock, it experiences high levels of volatility, which could make timing entrances and exits difficult while opening the door to significant declines over a short period of time.
- Short Sellers. If Hindenburg Research and Culper Research are right here, the company simply won’t be able to generate the value it’s promising. Ultimately, that could result in significant declines.
- Profitability. Finally, SOS isn’t a profitable company. As a result, it must rely on the money it has in the bank to survive. If that’s not enough, we could see a dilutive offering that results in reduced value for existing shareholders and significant declines.
Sure, there are risks to consider here. However, there’s also potential for significant gains. First and foremost, if retail investors band together to fight back against Hindenburg Research and Culper Research, they could push a short squeeze that sends the stock flying. So, there’s plenty of short-term potential here.
However, the stock is also pretty exciting from a long-term view. If everything the company says is on the up and up, it will quickly become one of the biggest cryptocurrency mining companies in the world. Should this be the case, significant gains could be just around the corner, making SOS stock one to watch closely.